Northern District of California Certifies Part of a Class Against Uber

Much is being reported in the media about the decision of the United States District Court for the Northern District of California certifying a class of drivers for the Uber ride service who contended that they were employees, not independent contractors. O’Connor v. Uber Technologies, Inc., Case No. C-13-3826 EMC (September 1, 2015). The case is significant for its display of the inherent litigation risk for any new business model and for its impact on one of the most prominent players in the shared economy, but it is otherwise likely too early to assess its impact at this stage.

The O’Connor case was brought under California law ostensibly on behalf of 160,000 California Uber drivers for the period August 16, 2009, to the present. The plaintiffs contended that they were misclassified as independent contractors and entitled to recover under the California Labor Code as a result. Among their claims was one that they should have been given “tips” allegedly received by the company through its fee structure with passengers.

Incidentally, this was the same court that issued the trial court decision, later decisively overruled in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011). Judge Chen, the judge assigned to the case, is a former ACLU lawyer and magistrate judge appointed to the federal bench by President Obama in 2009.

Uber, for its part, asserted that the drivers were independent contractors, as reflected in the driver agreements and based upon factors such as that the drivers kept their own schedules, generally used their own cars, and had no direct supervision. The plaintiffs, for their part, asserted that Uber exercised control through, among other things, establishing minimum standards for drivers and their cars, largely setting fees, and requiring certain levels of customer satisfaction.

On March 11, 2015, the court denied Uber’s motion for summary judgment. We blogged that decision here. In a nutshell, the court applied somewhat of a nest of tests based upon California and, to a lesser extent, federal wage and hour law. While acknowledging that the ultimate test was the right of control, the court evaluated the case based on a series of secondary factors. These included:

whether the one performing services is engaged in a distinct occupation or business;

the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;

the skill required in the particular occupation;

whether the principal or the worker supplies the instrumentalities, tools, and place of work for the person doing the work;

the length of time for which the services are to be performed;

the method of payment, whether by the time or by the job;

whether or not the work is a part of theregular business of the principal; and

whether or not the parties believe they are creating the relationship of employer-employee.

Not content with just those factors, the court looked to California law and found still others, such as

(i) the alleged employee’s opportunity for profit or loss depending on his or her managerial skill;

(j) the alleged employee’s investment in equipment or materials required for his or her task, or his or her employment of helpers;

(k) whether the service rendered requires a special skill;

(l) the degree of permanence of the working relationship; and

(m) whether the service rendered is an integral part of the alleged employer’s business.

The court noted that these 13 tests had to be applied “flexibly” and ultimately concluded that a question of fact existed and that the matter would need to be resolved by a jury. The court did note that these tests were of questionable utility and conceded that many might “arguably... appear outmoded in this context,” but refused to take that into account in its analysis.

Six months later, the court issued its decision on certification. The decision is 68 pages long and involved a fairly fact-intensive inquiry under each of the 13 factors cited above. Without recounting that lengthy analysis, there are several important points.

First, the case is limited to California Uber drivers and claims under California law.

Second, during the course of the case, Uber changed its driver agreements to take advantage of the decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), including a class action waiver. (The court’s opinion makes it clear that it disapproves of the change.) This change likely lowered the number of class members significantly.

Third, the court’s class definition narrowed the class in several respects, including excluding drivers who had not worked individually under their own name.

As to the court’s analysis of the class issues themselves, the court certified the claims under Rule 23(b)(3), and its opinion focuses, appropriately, on the issue of predominance. In doing so, the court was largely dismissive of Uber’s arguments, finding in some cases that its defenses applied class-wide (such as the fact that drivers set their own schedules, set their own routes, can work for others, and use their own vehicles). The court gave credit to five declarations from the class on behalf of the plaintiffs, but refused to give any weight to 400 declarations from Uber on the grounds, among others, that the number was allegedly insufficient.

Much of the alleged tip claim appears to be one of semantics. Uber’s website tells passengers that there is no need to tip, as any tip is “included” in the price. Uber simply pays drivers about 80 percent of what it receives from the passengers without breaking out a specific tip amount. The court almost sarcastically finds even though Uber never really took out a tip, its advertising suggests that it did, and since it never paid a tip it had never really collected, this constituted a common question of fact that binds the class. This seems to be the court’s way of trying to find a class-wide issue that might better stand up on appeal.

Uber will, of course, have a right to seek a Rule 23(f) discretionary appeal and will likely do so. Irrespective of what the Ninth Circuit may do, the issue is novel enough, perhaps, to warrant Supreme Court review. What is clear, however, even by the court’s own concession, is that the rules it applied may be inappropriate for the shared economy. Given that uncertainty, those with novel business models might take a page out of Uber’s book and adopt arbitration agreements with class waivers to limit the risk of litigation and attendant cost and publicity.

The bottom line: A district court has indeed certified a class alleging misclassification against Uber, but the decision is highly fact-specific, relies on California law provisions that won’t apply nationwide, and is already being eclipsed by contract changes.

Latest Posts

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

"My best business intelligence, in one easy email…"

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Privacy Policy (Updated: October 8, 2015):

hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.